Construction materials costs outpace completed buildings costs

The cost of materials used in construction increased significantly faster than the price of completed buildings, according to a new analysis of federal producer price data released by the Associated General Contractors (AGC) of America. AGC officials warn potential restrictions on the use of imported construction materials threaten to boost the price of infrastructure, buildings, and new homes and apartments.

"Steep price hikes have hit a wide range of key materials used in construction in the past few months, and contractors have received numerous letters from vendors announcing large additional increases in the next month or two," says AGC Chief Economist Ken Simonson. "Contractors cannot pass these costs along on projects already underway, and the data show they are not yet able to price new buildings at a level that reflects their rising materials and labor costs."

From January 2016 to January 2017, there was a 3.8 percent increase in the producer price index for goods used in construction. Another government report showed average hourly earnings for all workers in construction climbed 3.2 percent during the same period. The price index for new nonresidential buildings—what contractors charge for their work—increased only 1.4 percent.

According to AGC, the rise in construction materials costs during the past year largely can be attributed to increases in the cost of copper and brass mill shapes (19.9 percent), steel mill products (11.4 percent), and lumber and plywood (3.7 percent), as well as a 34.8 percent increase for diesel fuel, which contractors use directly and pay for through surcharges on the thousands of deliveries to construction sites.

AGC officials cite three types of proposals that threaten to drive construction costs even higher: an expansion of restrictive "Buy America" provisions for construction materials to a wider variety of federally funded infrastructure projects; punitive tariffs on imported steel used in many types of buildings; and limitations on Canadian lumber commonly used for residential projects.

"If the president and Congress are serious about rebuilding the nation's aging infrastructure, the last thing they should do is put in place measures that will needlessly increase the cost of building these projects," says AGC CEO Stephen E. Sandherr. "The best way to rebuild the domestic market for manufacturing key construction materials is to put in place long-term infrastructure funding mechanisms that will reassure manufacturers that there will be steady demand for their products."

OSHA issues additional $205,544 fine to roofing contractor

The Occupational Safety and Health Administration (OSHA) cited Robert Barringer III, owner of Barringer Brothers Roofing, Swansea, Ill., Feb. 3 for multiple safety violations. Barringer received fines totaling $205,544 for the violations; he already faces proposed fines of $485,902 from previous violations and now owes OSHA more than $690,000, according to Bloomberg BNA. Barringer Brothers Roofing is not an NRCA member.

After observing Barringer's employees working in unsafe conditions, OSHA issued willful violations to Barringer for not ensuring workers using pneumatic nail guns wore eye protection; not providing workers on roofs with fall protection; and failing to have an accident-prevention program. In addition, five serious violations allege Barringer was responsible for fall-protection hazards such as allowing workers to use fall-protection lanyards that should have been taken out of service, incorrect rigging of fall-arrest systems and not inspecting the fall-arrest systems.

OSHA has cited Barringer 65 times since 2007. In January, OSHA relegated Barringer to its Severe Violator Enforcement Program, a program focusing on recalcitrant employers that endanger workers by committing willful, repeat or failure-to-abate violations. On Jan. 31, OSHA was granted an enforcement order from the U.S. Court of Appeals for the Seventh Circuit in Chicago that could turn civil violations from five inspections into criminal violations if Barringer does not comply with final orders from the Occupational Safety and Health Review Commission.

Drone industry seeks additional regulations to expand growth

The drone industry has expressed concern President Trump's Reducing Regulation and Controlling Regulatory Costs Executive Order could deter growth within the industry. The Executive Order issued Jan. 30 requires that for every new regulation proposed or finalized, at least two must be identified for elimination.

Construction companies have become abundant adopters of drone technology because drone use can help keep workers safe and boost time-efficiency. The Federal Aviation Administration (FAA) has granted 5,551 exemptions allowing for commercial drone use—965 of which have been wholly or partially for construction use.

In May 2016, PricewaterhouseCoopers released a report showing the drone industry was valued at about $2 billion and noted the industry is expected to reach $127 billion by the end of the decade. PricewaterhouseCoopers also noted more regulatory guidance is needed.

Lisa Ellman, a partner at Hogan Lovells US LLP and co-executive director of the Commercial Drone Alliance (CDA), told Bloomberg BNA the Executive Order could potentially harm the growth of drone technology. According to Ellman, drone manufacturers and construction companies had been looking forward to new drone regulations that would help expand the safe use of drones. One proposed rule would have permitted drone flights over bystanders, allowing companies to use drones for inspecting and surveying construction sites in a fraction of the time it would require to inspect a site manually. The Department of Transportation and FAA expected to release the proposed rule by the end of the year, but the Executive Order prevents the rule from moving forward. The current final drone regulations, released in 2016, are "very strict operationally, so we need a rule to provide authorization," Ellman says.

CDA would like the Trump administration to consider new regulations to be deregulatory actions.

In a Feb. 9 letter to Dominic Mancini, acting administrator for the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs, CDA wrote: "Specifically, we urge OMB to promulgate additional guidance to the FAA clarifying that every new regulation issued that further integrates drones into the National Airspace System qualifies as a 'deregulatory action' for purposes of implementing the Executive Order. The general goal is to encourage the FAA to implement regulations that repeal aspects of the Federal Aviation Regulations that hold the drone industry back in ways that are nonsensical."

Undocumented immigrant deportations will strain U.S. job market

According to a recent paper published by the National Bureau of Economic Research in November 2016, removing all undocumented immigrants from the U.S. would cost the economy as much as $5 trillion over 10 years.

That dollar amount represents the contribution of millions of unauthorized workers to the economy, totaling about 3 percent of private-sector gross domestic product, according to the paper. Removing the undocumented workers would be equivalent to removing Massachusetts from the U.S. economy, says Francesc Ortega, a co-author of the study and an economics professor at Queens College, New York.

"It's a big number," Ortega says. "Undocumented workers are present across the whole economy, even if they are heavily concentrated in sectors such as agriculture, construction and hospitality."

On Feb. 21, the Department of Homeland Security issued a pair of memos stating any undocumented immigrant now may be deported in accordance with President Trump's Executive Orders. The administration pledged to hire 15,000 additional border patrol and immigration agents and begin building a wall on the Mexico border.

According to Pew Research Center estimates, about 8 million unauthorized immigrants were working or looking for work in the U.S. in 2014. Unauthorized immigrants include those who enter the U.S. without legal permission or overstay their visas. Most unauthorized immigrants are of working age, which means they account for 5 percent of the U.S. labor force and 3.5 percent of the total U.S. population.

In January 2017, the jobless rate in the U.S. was 4.8 percent, a level some economists consider to be full employment. Ethan Harris, head of global economics for Bank of America Merrill Lynch, says following through on plans to deport undocumented workers would hurt industries already facing worker shortages.

"The challenge is particularly high now because the labor market has tightened up not just overall but in areas in which you would think undocumented immigrants would be important, so that means that it's going to be hard to fill these jobs if you deport these employees," Harris says. "You have to think about indirect effects when you disrupt production in industries in which they're a critical part of getting things done. So there's a transition cost, as well as the cost of a reduced labor force."

Sika AG acquires Rmax Operating

Sika AG, Baar, Switzerland, has agreed to acquire Dallas-based Rmax Operating LLC, a manufacturer of polyisocyanurate insulation products and accessories.

Rmax Operating's products are used for residential and commercial wall and roof applications throughout the U.S. The company has production locations in Dallas; Fernley, Nev.; and Greer, S.C., and generated sales of more than $75 million during 2016.

The acquisition will allow Sika AG's largest North American company, Sika Corp U.S., Lyndhurst, N.J., to benefit from in-house production of the insulation products included in its roofing and building envelope solutions.

"The acquisition of Rmax fits perfectly with Sika's growth strategy in North America, further strengthening our already fast-growing building systems in roofing, sealants and waterproofing," says Christoph Ganz, Sika AG's regional manager for North America. "Rmax brings us a proven industry leader, with strong innovations for building envelope applications, along with manufacturing expertise for wall and roofing insulation. We proudly welcome Rmax employees to the Sika team and are excited about growing our business together."

No delay for court case challenging OSHA's silica rule

On Feb. 13, a three-judge panel said a court case challenging the Occupational Safety and Health Administration's (OSHA's) silica rule will not be delayed, which means the Trump administration has less time to decide whether it should defend the union-backed rule in court before companies must comply with the standard, according to Bloomberg BNA.

The decision was unanimous but did not explain why the employers' delay request was rejected.

Those opposing the silica rule had asked the court to delay the case for 60 days to give the Trump administration time to decide whether OSHA would continue to defend the rule. Those supporting most of the rule's provisions opposed any delay.

The silica rule sets a permissible exposure limit for airborne crystalline silica that is half the previous general industry limit and 80 percent less than the old construction and maritime standards. The rule took effect in March 2016 and requires construction employers to comply by June 23, 2017; most other industries have until June 23, 2018, to comply.

OSHA reports about 2.3 million workers are exposed to silica in workplaces, and about 940,000 of those are exposed to silica levels exceeding the new standard. OSHA says the rule will prevent 642 deaths per year and 918 moderate-to-severe silicosis cases.

NRCA has serious reservations regarding OSHA's silica rule, including concern the final regulation will increase fall hazards for roofing workers by requiring contractors to implement engineering controls that are not suited to work performed on sloped roofs. NRCA also is concerned the rule will add significant new compliance costs for contractors. To view NRCA's April 2016 statement regarding OSHA's silica rule, go to www.nrca.net/0416-OSHA-silica-regulation.

In light of its concerns, NRCA, along with its roofing industry affiliates and partners, is embarking on a research project to compile objective data for a variety of operations undertaken by roofing contractors. The new silica rule for construction operations allows for the use of objective data to assess worker exposure. The expectation is compilation of such data will assist contractors with assessing the risk to roofing workers while avoiding costly air monitoring and guiding the selection of control methods to minimize or eliminate silica exposure.

Solar was the largest source of new energy in 2016

Photovoltaic panels were the largest source of new electric capacity in the U.S. for the first time in 2016 with solar developers installing a record 14.6 gigawatts, according to Bloomberg BNA. The number of gigawatts installed was almost double the total from 2015.

Solar panels on rooftops and fields accounted for 39 percent of new energy generation in 2016; natural gas contributed 29 percent; and wind contributed 26 percent, according to a Feb. 15 report from GTM Research and the Solar Energy Industries Association (SEIA). Total solar installations were up 95 percent from 2015, boosted by large fields of solar arrays that usually cost less than rooftop panel installations. Utility-scale development increased 145 percent in 2016, the most in the industry, as costs became increasingly competitive with power produced from gas, according to the report. Residential rooftop installations and community solar projects also saw increases, with residential rooftops up 19 percent from 2015 and more than 200 megawatts installed for community solar projects.

The installation increase proves solar energy has become an important part of the U.S. energy mix. The solar industry employs 260,000 people and accounted for 2 percent of all new U.S. jobs in 2016. As President Trump pushes for wider use of fossil fuels, Republican and Democratic governors from 20 states sent the White House a letter Feb. 13 underscoring the importance of clean energy as an economic driver.

"The nation's wind and solar energy resources are transforming low-income rural areas in ways not seen since the passage of the Homestead Act over 150 years ago," Kansas Gov. Sam Brownback and Rhode Island Gov. Gina Raimondo wrote in the letter.

"What these numbers tell you is that the solar industry is a force to be reckoned with," says Abigail Ross Hopper, SEIA's CEO. "Solar's economically winning hand is generating strong growth across all market segments."

Bloomberg New Energy Finance indicates the growth is expected to continue, with total installed capacity in the U.S. set to reach 105 gigawatts by 2021, a significant increase from the current 38 gigawatts already installed.

Solar is also reaching new areas, explains Justin Baca, SEIA's vice president of markets and research. Installations grew last year in 31 of the 40 state markets SEIA tracks, including areas such as Alabama that haven't traditionally been solar strongholds.

"We don't expect to see many years with nearly 100 percent growth that we had in 2016," Baca says. "But we see a future where lower-level stable growth is achievable."


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